Andy Thompson: Tax reform would boost small business, economy

Saturday

Aug 12, 2017 at 5:00 AMAug 12, 2017 at 7:48 AM

If polls are to be believed, Democrats stand a chance of taking back the U.S. House of Representatives in 2018.

In order to salvage their majority, Republicans need a legislative achievement they can showcase to their constituents. Tax cuts, which are supported by a clear majority of the American population, are the vehicle they should employ.

Current tax rates unfairly penalize small businesses, and in turn, hurt their employees. Small businesses employ about half of the private-sector workforce, and create two-thirds of the new jobs in the United States. But small businesses, which are mostly structured as pass-through entities that pay taxes at individual rates, have been burdened by a marginal tax rate of 40 percent, with that number easily reaching 50 percent once state and other taxes are added in.

As a result, small businesses are struggling. Business startup rates have continued their decades-long decline and there is an increased concentration of economic power among a handful of corporate behemoths who are quite cozy with their government counterparts.

America cannot claim to support a pro-business economy while simultaneously penalizing risk-takers for pursuing their dreams and putting Americans back to work.

My family business, "Bird Watcher's Digest," is starting its 40th year of operation. My brother and I share publishing duties; we also partner on sales efforts. My mom continues to champion our customer service, and my sister directs circulation.

As a small-business owner myself, I understand that taxes make the life of a small-business owner very trying and are very time-consuming. Earnings that my company would have otherwise used to hire new employees, open a new location and raise wages are instead carried off to Washington, D.C., to be used on vague federal programs administered by bureaucrats earning six-figure salaries.

My experience is not unique. A recent national poll of small-business owners conducted by the Job Creators Network finds that most respondents would plow tax-cut savings back into their business exactly as we would.

The complexity of the tax code means small-business owners spend an average of 60 hours filing their taxes — that’s longer than a full week! This is time they could have otherwise spent doing what they do best: serving their customers. The complexity of the tax code also provided a strong incentive for soliciting carve-outs and special favors. In 2016 alone, lobbyists spent $3.15 billion pursuing their agenda, and they spent $1.66 billion for the first half of 2017.

Small-business owners weighed down by government cannot afford to lobby Congress individually. To allow small businesses to flourish financially, they need an equal playing field.

Current tax cut proposals coming out of the White House are encouraging, with significant tax cuts offset by a simpler system with fewer loopholes. The ensuing economic growth that these tax cuts would spur would help the country get back to its historical standard of three percent GDP growth — further offsetting their cost and permitting the tax cut to be deficit-neutral.

In addition to helping small businesses and their employees, small-business tax cuts would restore momentum to a Main Street that still hasn’t recovered from the Great Recession. As the Wall Street Journal put it earlier this year, rural America is the new inner city. On a variety of economic indicators, Ohio towns are still suffering. The national economic headwinds have blown through Ohio; small-business tax relief would improve the climate for job creation substantially, and allow a real recovery to take hold.

Tax cuts work. For the good of the country and their party, Republicans must unite around them.

Andy Thompson, a Republican from Marietta, is the state representative from the 95th district of Ohio.